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Here to stay: Apartment hotels expanding alternatives

Apartment hotel operators are targeting the millennial mindset with brands that tout communal kitchens and shared workspaces – and they are gaining new ground paved by home-sharing services, which provide a more predictable and consistent experience that’s less expensive than a conventional business hotel.

“Millennials have led the exploration of alternatives to hotels,” says Barry Hickey, group development director at Dublin-based Staycity Aparthotels. “They use their accommodation in different ways than traditional guests – wanting communal space for work and pleasure so they are not confined to their rooms.” Staycity, The Ascott Limited, Frasers Hospitality and others are designing properties with 24-hour reception, informal cafes and green toiletries. 

 

The Ascott Marunouchi Tokyo
The Ascott Marunouchi Tokyo

The extended-stay hotel model is most developed in the U.S. In contrast, European operators leased apartments in city buildings — not always under the same roof — and didn’t develop consumer brands, says Diane Mayer, global brand manager for Marriott International’s extended-stay and serviced apartment properties. There are more than 6,500 extended-stay locations with nearly 500,000 units in the Americas and Canada, according to a recent report by London-based Apartment Service’s Global Serviced Apartments. That far outpaces Europe, with nearly 2,000 locations and more than 100,000 units, and Asia, with less than 1,000 locations and fewer than 100,000 units.

Bridging the gap

European and Asian operators say the changing habits of business travelers — to be more “local,” with space for cooking, working and socializing — have energized the market. “Companies are sending staff on project assignments for months rather than relocating them,” says Gerald Yong, chief investment officer at Singapore-based Ascott. “Serviced apartments bridge the gap between hotels and the traditional rental market.”

The number of serviced apartments worldwide grew 10.5% to 826,759 in the 18 months through March 2016, according to the GSAIR. Some analysts are worrying about a glut. Marriott, which doesn’t use the term “extended-stay” outside the U.S., plans to add 250 Residence Inn properties to its stable of 750 by 2020-21, doubling its reach to 20 countries, Mayer says. She dismisses concerns of oversupply, pointing out that one-third of all business trips are part of an extended stay of at least five nights, while the supply of extended-stay properties is nowhere near one-third of all hotels.

Ascott, a unit of real estate giant CapitaLand and the largest operator outside North America, in July boosted its stake in Australia’s Quest Apartment Hotels to 80% from 20%, adding 180 properties with 11,000 units, and also acquired an 80% stake in California-based Synergy Global Housing that will triple the company’s U.S. footprint to 3,000 units. Ascott operates more than 43,000 units worldwide, has 26,000 under development, aiming for 80,000 by 2020.

The company is opening the most properties in China, its largest market, Yong says. Last year Ascott invested in Tujia.com, China’s largest apartment sharing platform.

Courting millennials

Like its competitors, Ascott has segmented its audience and is eager to court millennials. It owns six brands, including Citadines, Somerset, geared to families, and its upscale Crest Collection. Its newest brand, Lyf, caters to young professionals with communal spaces that can be transformed for workshops or social gatherings, and social kitchens where guests can prepare meals or take cooking classes. Ascott aims to have 10,000 units under the Lyf brand by 2020 with a focus on Asian and Western European cities.

Fast-growing Frasers Hospitality, also based in Singapore, operates three formats under the Fraser name and two additional brands. It launched a partnership with Mercedes, Mercedes-Benz Living @ Fraser, which debuted in London and expanded to Singapore. The luxury suites include a smart TV, high-end 3-D surround sound system and a chandelier of Swarovski crystals.

Frasers positioned its Modena brand for millennials with eco-friendly toiletries and other consumables. The properties are within business zones and technology parks, with communal workspaces, cafes for grabbing quick meals and 24-hour gyms. The laundry rooms feature Nintendo Wii.

Operators are making a push in Europe, with 10,000 units in the pipeline, according to a July HVS report, and new players are emerging such as Base in Switzerland and Cityden in Amsterdam, notes report author and senior associate Nicole Perreten.

The United Kingdom and Germany will see almost three-quarters of the new properties. Leading the way are Residence Inn, with 1,232 units opening through 2019, and Ireland’s Staycity, with 1,166 units slated through 2020, according to HVS. Staycity, which recently launched upscale Wilde Aparthotels, plans to more than triple its portfolio to 15,000 rooms by 2022 with a focus on Dublin, the U.K. and Germany.

 


Contributed by Judith Crown

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